By ANDREA JAMES, P-I REPORTER

Published 10:00 pm, Monday, September 25, 2006

Two years ago, Sound Pharmaceuticals Chief Executive Jonathan Kil ran into an offer he almost couldn't refuse -- in the form of $6 million in Pennsylvania state-funded venture capital.

The only requirement: He must uproot his Seattle-based firm, which is developing drugs for hearing loss and traumatic brain injury, and move to Pennsylvania.

Competing states want companies such as Sound Pharmaceuticals -- and they aren't afraid to throw money and tax incentives at them to lure them away from the Pacific Northwest.

If the Puget Sound area is to be the premier region for life science research and biotechnological innovation, the state has to increase incentives to at least match what other states are offering, according to recommendations presented Monday at the governor's second annual Life Science Summit.

Ultimately, Kil kept his business and 10 employees in Seattle with the help of $5 million from a Swiss investor. He also stayed because of the proximity to scientists at the Fred Hutchinson Cancer Research Center.

"I like being out here," Kil said. But, "let's face it, we are getting ... kicked by Pennsylvania, Maryland, Virginia -- all of those."

Although Washington laws don't allow for the kinds of incentives other states can offer, the area is able to compete because it is rich with talent and research firms, panelists said.

"It's easy to forget how lucky we are," said Mark Emmert, the president of the University of Washington. "We already have a huge advantage over many, many, many regions of the country that would hack off body parts to have what we have."

Gov. Chris Gregoire said she supports some tax incentives for research, but it is too soon to give dollar figures for how much the state should contribute to life science companies.

"It's not all about the state," she said in an interview after the summit. "It's about public-private partnership. The appetite in the Legislature is drawing thin on tax incentives until they get done studying whether those incentives actually work."

Last year, local bioscience companies generated $814 million in private investments to support their research, according to Bruce Montgomery, chairman of the Washington Biotechnology & Biomedical Association.

That group presented its draft recommendations Monday on how to compete with other regions.

The association hopes to soon break the $1 billion mark, partially through investment spawned by the Life Sciences Discovery Fund, which the state created with $350 million in tobacco-settlement money.

"We want to hit the ground running with this fund," said Lura Powell, chairwoman of the authority that governs the fund.

The Life Science Fund Authority plans to issue a request for proposals in April 2007 and announce its first recipients in December. The money won't be released until 2008, she said.

Microsoft Corp. is the first external donor to the fund, offering $500,000, Powell said.

With the help of that fund, Washington hopes to become the leading state for global health research, similar to the way that California made itself into a stem-cell research powerhouse through a $3 billion public bond initiative.

Companies based in and around Seattle are researching ways to combat those diseases.

"We have a long, long history statewide of making great contributions to global health," Gore said.

But lawmakers attending the summit said that getting taxpayers to support initiatives that don't have immediately visible effects is not easy -- especially with about 600,000 residents without health insurance.